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What is lowest transfer price cargo division should accept

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Point 1: Yama Industries Cargo Division is currently operating at 100% of capacity (capacity is 100,000 units). Normal selling price is $20.00 per unit. At current operating levels, fixed costs are $6 per unit and variable costs are $9 per unit. Another division of Yama Industries would like to buy from the Cargo Division. If this sale is made, $2 per unit in variable selling and administrative costs would be saved.

Question 1: What is the lowest transfer price the Cargo Division should accept?

Reference no: EM132528255

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